NATURAL GAS

The natural gas market has shrugged off one of the coolest Augusts in recent memory because production is coming down.  We are entering a shoulder month soon, when prices usually sell off. But an active hurricane season could put a floor in the market.  Combine this with a potential weak La Nina; fundamentals may possibly be changing for the natural gas market.  To find out more, as well as receive weekly advice in the energy market, email us at subscriptionsbestweather@gmail.com.

Natural gas,

Natural gas production is coming down and that is one key reason prices have not fallen during the cool August.

The National Hurricane Center is currently forecasting the reformation of Harvey to a tropical depression in the Bay of Campeche by Wednesday or Thursday. Thunderstorms are not too organized and immediate intensification (today) is not expected.  However, due to the low elevation of the Yucatan, a complete destruction of the storm will not occur.

Models currently show Harvey as a tropical storm making landfall along the southern Texas coast. The GFS (MSLP and rainfall, bottom) currently has the strongest low pressure at landfall.  The eastern track gives the storm more time to intensify prior to landfall.  The European (MSLP and 850mb winds, left) and Canadian (MSLP and rainfall, right) models are weaker, making landfall further south.  All of them have the storm slowly moving up the coast towards Louisiana after landfall.

model, hurricane, harvey

Although a Category 1-2 landfall is not out of the question, the latest intensity forecasts show a majority of models forecast an increase to tropical storm strength.  Now if the track trends towards the east, there will be more time to intensify.  The image below shows the predicted intensity by several different hurricane models.

track, intensity

At tropicaltidbits.com, there is a tool that indicates the best analog storms.  Basically, it shows how similar storms at this location ended up tracking. Most of the storms match the current model forecast.  The storms make landfall at the border or just south of Texas.

tracks

Harvey and the Energy Market

Some of the models show the storm hugging the coast for a few days (an unusual track).  If the storm does grind along the coast, this could have implications for the natural gas platforms and oil rigs located there.  Evacuations and work stoppages can lead to less production.  This was a major issue in 2005, with Katrina and Rita.  However, as we mentioned in a blog last week, shale production makes up a much greater piece of the pie.  Harvey’s impact on energy prices will still need to be monitored.  See the rigs marked with yellow dots along the coast of the Gulf of Mexico.

rigs, oil, natural gas, production

The Pacific is cooling which means no El Nino this winter.  A cool Nino 3.4 reduces wind shear over the Atlantic and allow more storms to form.  A possible weak La Nina this winter could also have implications for natural gas and crops in Brazil. The images below indicate changing index value and current spatial sea surface temperature anomaly.

SST, El Nino, Brazil, Hurricane

SST, El Nino

Confidence in the storm track and knowledge of the impacts to energy markets will increase when the storm reforms. For more detailed information and updates about how Harvey may affect the natural gas and crude oil markets and trading ideas, email us at subscriptionsbestweather@gmail.com.